SpaceX dives 10% after AI spending surge rattles investors

On Wednesday, SpaceX's shares plummeted by over 10% following a surge in AI spending, casting a cloud over an otherwise impressive earnings quarter. The company disclosed in its first earnings report as a public entity on Tuesday that its capital expenditures had increased sixfold to $18.4 billion in the second quarter, exceeding analyst projections. Most of these costs were attributed to AI development.

Despite this, SpaceX's shares closed at just over $125 on Tuesday, falling short of its $135 IPO price. This is a significant drop from the company's over $200 all-time high shortly after its listing. Investor anxiety has been mounting during the earnings season as concerns grow about whether these substantial tech investments will generate returns.

While SpaceX's AI models are considered less advanced than those of OpenAI and Anthropic, the company aims to become a cloud alternative by leasing computing capacity built with Nvidia chips.

SpaceX's CFO, Bret Johnsen, sought to reassure investors during the earnings call, stating that the company has been "efficient" with its spending. He added that on the AI compute side, SpaceX is able to deploy capital in a manner that yields a payback period of less than a year. However, the stock price continued to decline even as SpaceX narrowed its losses and announced promising future revenue.

Musk revealed SpaceX's ambitious goal of reaching $1 trillion in annual revenue by 2030, surpassing the previously anticipated timeline of 2031.

The stock market's reaction was not without its concerns. Steve Westly, founder of The Westly Group and a former Tesla board member, expressed skepticism about SpaceX's growth trajectory and the extent of costs that the company will incur before achieving profitability. Additionally, the company faces another potential market-moving event on Thursday, as the expiration of insider lock-ups allows insiders to sell a portion of their shares, potentially impacting the stock price.